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I’m looking at Alibaba going into Earnings

Danielle Shay Joins Seema Mody on Trading Nation to discuss how Chinese stocks are underperforming. Click the image above to see the full segment.

Lately, my primary trading focus has been on relative strength winners that’re benefiting from COVID-19.

One of my favorite trading setups is the rally prior to an earnings report on bullish anticipation of the actual report. Typically, I start this trade about 7-14 days prior and/or when it hits key support levels.

Last week, Amazon (AMZN) was a great example of this. Heading into earnings they rallied hard even though their actual report turned out soft. I was able to make a good trade because the anticipation was high, making the stock trade higher, but it was also due to the fact that I got out before the reports actually surfaced. This allowed me to ride the bullish run without getting burned by the less-than-perfect report.

I plan to do something similar with Alibaba (BABA).

Even though I wouldn’t necessarily want to own this long term, I love trading it short term. With its recent fall in price, it could potentially become an even better buy because you can get it on a discount going into earnings. Plus, I still think it has room to make a bullish run. E-Commerce has been particularly hot, and we’re still a few weeks away from earnings allowing it time to climb back up.

As for additional Chinese names — I like JD. I use the exact same setup on it, except I like it for a buy off of the 50 SMA, as it didn’t fall as far as Alibaba.

Click here to watch the full segment.


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